Medical Malpractice in Public Healthcare Systems: An Empirical Investigation of Scheduled Damages

In the last decades, medical malpractice has been framed as one of the most critical issues for healthcare providers and health policy, holding a central role on both the policy agenda and public debate. The Law and Economics literature has devoted much attention to medical malpractice and to the investigation of the impact of malpractice reforms. Nonetheless, some reforms have been much less empirically studied as in the case of schedules, and their effects remain highly debated. The present work seeks to contribute to the study of medical malpractice and of schedules of noneconomic damages in a civil law country with a public national health system, using Italy as case study. Besides considering schedules and exploiting a quasi-experimental setting, the novelty of our contribution consists in the inclusion of the performance of the judiciary (measured as courts’ civil backlog) in the empirical analysis. The empirical analysis is twofold. First, it investigates how limiting compensations for pain and suffering through schedules impacts on the malpractice insurance market in terms of presence of private insurers and of premiums applied. Second, it examines whether, and to what extent, healthcare providers react to the implementation of this policy in terms of both levels and composition of the medical treatments offered. Our findings show that the introduction of schedules increases the presence of insurers only in inefficient courts, while it does not produce significant effects on paid premiums. Judicial inefficiency is attractive to insurers for average values of schedules penetration of the market, with an increasing positive impact of inefficiency as the territorial coverage of schedules increases. Moreover, the implementation of schedules tends to reduce the use of defensive practices on the part of clinicians, but the magnitude of this impact is ultimately determined by the actual degree of backlog of the court implementing schedules.